In Module 4, you will continue with the CVP analysis you completed in the Module 3 SLP.

Scenario Continuation:

It is still January 2, 2012.You have just completed your revised SLP3 strategy using CVP analysis, and you are eager to implement your decisions for 2012 through 2014.

Using the CVP analysis from SLP3, run the simulation for a final time. Again, be sure to take notes about your analysis and the document the reasoning behind your decisions.

Finalize your report showing the strategy you have used.

Assignment Overview

Using the strategy that you developed in SLP3, run the simulation. Document your results as you did previously. Review and analyze these results, and develop a final strategy.

Please turn in a6- to 8-pagepaper, not including cover and reference pages.

Keys to the Assignment

The key aspects of this assignment that should be covered and taken into account in preparing your paper include:

• The revised strategy consists of the Prices, R&D Allocation %, and any product discontinuations for the X5, X6, and X7 tablets for each of the four years: 2012, 2013, 2014, and 2015.
• You must present a rational justification for this strategy. In other words, you must provide support for your proposed strategy using financial analysis and relevant theories.
• Use the CVP Calculator and review the PowerPoint that explains CVP and provides some examples.
• You will need tocrunchsome numbers (CVP Analysis) to help you determine your prices and R&D allocations.
• Make sure your proposed changes in strategy are firmly based in this analysis of financial and market data and sound business principles.Your goal is to practice using CVP and get better at it.
• Present your analysis professionally, making strategic use of tables, charts, and graphs.

SLP4

• It is still January 2, 2012. Using your CVP analysis from SLP3, you run the simulation, implementing your revised four-year plan. You keep track of your financial and marketing results year over year.
• You submit your final6-8 pagereport, which includes your Final Total Score.
• You compare ? and report ? your results with previous results.

SLP Assignment Expectations

Your paper will be evaluated using the grading rubric.

Tips and Suggestions

Note the following tips and suggestions:

You might find these downloads useful:

Decision Matrix Table- Download this Word doc with a blank table you can use to show your proposed strategy decisions.

PowerPoint discussing CVP- Provides a good overview of Cost Volume Profit analysis, the various equations that you can use, and how to use it. Some examples are provided showing how to use the CVP Calculator.

CVP Calculator- This an Excel-based calculator that you can use to determine prices, volumes, and profits. Keep in mind that it will tell you what need, but the market determines what you actually get.

• Include a cover page and a reference page, in addition to the6-8 pagesof analysis described above.
• Include appropriate section headings.
• Use charts and graphics strategically, but donotuse these as "space fillers." Include lengthy tables, etc. in an Appendix instead.
• Cite and reference all sources that you use in your work, including those that you paraphrase. This means include citations and quotation marks for direct quotes, and citations for that information which you have "borrowed" or paraphrased from other sources.
• FollowTUI Guidelinesfor well-written papers.

R&D Total Budget R&D% Allocation $ 24,000,000 33% R&D Costs Fixed Costs Total Fixed Costs $ 7,920,000 $ 70,000,000 $ 77,920,000 Target Profit Variable Cost/Unit This CVP Calculator has been developed specifically for BUS599 SLP. -Enter the R&D allocation %. -Enter the Fixed Costs. -Enter the Target Profit (use 0 for Breakeven Calculation.) -Enter the Variable Cost per Unit. The Calculator will calculate two different formulas. Enter Price and it will calculate the Volume. Enter the Volume and it will calculate Price. $ 140.00 Price CLEAR ALL Enter the data in the Green Cells. Calculations are automatic. Enter Volume Calculate Price Enter Price Calculate Volume $0 Volume Sales Revenue ROS $ 250.00 708,364 $ 177,090,909.09 0.00% Volume Price Sales Revenue ROS ly for BUS599 SLP. Example Calculation: Take X5 R&D% = 33% Fixed Costs = $70,000,000 Variable Cost/unit = $140.00 ulation.) For Breakeven, Target Profit = 0 s. Enter Price and it will calculate Price. Enter Price = $250.00 Calculate Volume (Breakeven) = 696,364 Enter Volume = 700,000 Calculate Price (Breakeven) = $249.43 Enter Volume Calculate Price 700,000 $ 251.31 $ 175,920,000.00 0.00% What does this mean? It means: To Breakeven (profit = 0), with a price of $250.00, you need to sell 696,364 units. OR, if you sell 700,000, the price needs to be $249.43 to breakeven. Another Example: Suppose you want to obtain a profit of $20,000,000. Enter that in the Target Profit. At a price of $250.00, you need to sell 878,182 units. OR if you sell 700,000 units, you need to sell them at $278.00. Trident University International SLP 3 MGT599- Strategic Management Page 1 Introduction CVP or cost volume profit method is utilized to determine the impact that pricing and costs will have on profitability to the company by analyzing the lowest level of sales the company needs to get in order to avoid losses. The Clipboard Tablet Company needs to evaluate the three tablet lines in relation to pricing and determining the research and development (or R&D as it will be called throughout this paper) costs to help increase the profits for the company. This paper will examine how each product performed from 2012-2016 in regards to R&D costs and pricing. We will determine and analyze the strategy to improve company performance during this time period. Analysis of Time Period During the early part of this time period, the X5 and the X6 product lines are still in the growth phase so continual R&D increases need to be completed so that the products can continue to grow with new features. This will lead to increased demand by the target audience. Utilizing CVP, the strategy is to increase the R&D for both the X5 and the X6 in 2012. Based on the results for the year 2012, will determine if R&D is continued for the following years. If customer demand goes up, then R&D will go up. For pricing in 2012, the X5 will stay the same price, whereas the X6 price will go up based on the analyst's statements referencing that the X6 customers are not price sensitive. As stated previously, the R&D is going up for the X5 and the X6 in 2012. The X7 product line is going to be discontinued so the R&D costs for that product line are being absorbed into the X5 and X6. The X7 is costing the company a lot of money and eating into profits for the other two product lines so the company needs to drop that product line at this time. Page 2 The X5 is listed at a price of $285 in 2011 and that price needs to stay the same at this time since the research shows that the customers are price sensitive for this product line. On the other hand, the price of the X6 is being increased to $460 since research shows the customers of this product line are not price sensitive. R&D costs have been increased 45% to improve the product line. The strategy is to raise the R&D costs of the X5 and the X6 during the 2012 and 2013 years and to drop the X7. The price of the X6 is being raised since it has an inelastic demand. The X5 price will remain the same until sales and profits decline. At that point the price will drop on the X5. 2013 will have the R&D costs of both products remaining the same, and then in 2014 and 2015 the R&D costs for the X5 product line will go down, and the R&D costs for the X6 product line will go up. The X7 product line will remain eliminated and not see a return at any time during this 4-year period. 2012 Simulation Results Produc Price R& t X5 X6 X7 D 270 50% 460 50% Terminated 0% Results X5 X6 X7 Marketing Financial Advisor 2,064,017 557,284,699 X5 1,059,527 487,382,302 X6 in the growth Total Score: Remarks performance phase, there are 388,765,67 compares customers who 4 favorably with have not bought others. it. Utilizing our strategic pricing and R&D cost figures, we enter those numbers into the simulator and get the results for the X5 and X6 product lines. Once again the X7 line has been Page 3 terminated. What this shows us is that the total score for 2012 beats the score that the previous manager Joe achieved. This justifies utilizing the strategy that we have come up with. The X5 and the X6 product lines have both increased in sales and profits and shows that these products are growing and the advisor's remarks also show that our strategy is a better option than Joe's strategy was. Moving into 2013, we will maintain the price of the X5 at $270. It is unknown when the X5 will reach the mature phase. The X6 price will once again be raised by $10 to $470. The analyst stated that the customers of the X6 are not price sensitive so this strategy is to increase the profits for the company. R&D will remain at 50% for each product line. The X7 stays discontinued for 2013. 2013 Simulation Results Produc t X5 X6 X7 Price R& Results X5 270 470 Discontinue D 50% 50% - Marketing Financial Advisor 2,982,727 1,834,592 805,282,162 862,258,409 X5 is in the Customers are Total Score: Remarks shakeout not phase. sensitive willing 7 d X6 X7 price 967,914,36 to pay more for the X6. 2013's overall score shows that once again our strategy has achieved better results than Joe's strategy for the same time period. The analyst stated that the X5 has reached the shakeout phase, and that the customers of the X6 are not price sensitive and willing to pay more for the X6. Page 4 In 2014 the price of the X5 is going to be reduced to $265. The production costs of the X5 are pretty high so reducing the costs by too much can lead to losses for this product line. The X6 will also see a price decrease during this time as well. Our research shows that the X6 may have reached its shakeout phase at this point. R&D will be decreased for the X5 to 40% and increased for the X6 to 60% during this time period. The strategy is to increase profits for the X6. As in previous years, the X7 remains discontinued. 2014 Simulation Results Produc Pric R& Results X5 X6 t X5 X6 X7 e 265 430 - D 40% 60% - Marketing Financial Advisor 1,208,512 3,429,907 320,255,782 1,474,859,911 Customers pay the X6 has reached Total Score: Remarks same price Clipboard X7 for the shakeout 1,502,028,84 Tablet phase. 0 products. Once again we see results that are better than that of Joe's for the same time period. The X5 has declines in sales revenue showing us that the product line has reached the decline stage. The analyst advises that we need to ensure that the pricing for the X5 be comparable to the competitors. Additionally, the analyst advises that the shakeout phase for the X6 has been reached. In 2015, the strategy for each product line is to once again reduce the prices so that we can focus on protecting our market share. The analyst told us that the X6 has reached the shakeout phase, so we will reduce the price to $420. Additionally, we will lower the price for the Page 5 X5 to $260 to ensure we target higher sales, but do not lower the price so much that it costs us money. The R&D costs will remain at 40% for the X5 and 60% for the X6. 2015 Simulation Results Produc Pric R& Results X5 X6 X7 t X5 X6 e 260 420 D 40% 60% Marketing Financial 675,659 174,671,364 1,189,284 499,499,33 - 5 X7 - - Advisor Customers pay the same Total Score: Remarks price 1,612,297,53 for Clipboard Tablet products as they do for 9 competitor products. After utilizing our strategy for the same time period as Joe, we see that our strategy provides better results. During this time period, Joe scored $1,513,237,527 and our score shows results of $1,612,297,539. By developing and implementing a new strategy, it provided better results than by just using the default settings that Joe utilized. Page 6 Total Score 1,800,000,000 1,600,000,000 1,400,000,000 1,200,000,000 Total Score 1,000,000,000 800,000,000 600,000,000 400,000,000 200,000,000 0 2012.0 2013.0 2014.0 2015.0 Conclusion Overall our strategy beat Joe's strategy by $99,060,012 which shows that our strategy is the better strategy. By terminating the X7 it allowed us to put more R&D funds into the X5 and the X6 which allowed us to raise the prices of the two product lines which brought in more profits. With the X5 and the X6 in maturity phase, now would be a good time to reintroduce the X7 with new features to attract new customers and maintain market share for Clipboard Tablet Company. Page 7 References Forio. (n.d.). Simulation : Tablet Development Sim - Forio Simulate. Retrieved from http://forio.com/simulate/alikassim/tablet-development-sim-23/run/#p=page1 Page 8 Strategy Matrix X5 X6 X7 2012 Price R&D % Discontinue? Price R&D % Discontinue? Price R&D % Discontinue? Year by Year Decisions: Pricing & R&D Allocations 2013 2014 Price Price R&D % R&D % Discontinue? Discontinue? Price Price R&D % R&D % Discontinue? Discontinue? Price Price R&D % R&D % Discontinue? Discontinue? 2015 Price R&D % Discontinue? Price R&D % Discontinue? Price R&D % Discontinue